WRAPUP 11-China says 156 dead in Xinjiang riot

* 156 dead in Xinjiang regional capital

* Hundreds of rioters arrested

* Protesters dispersed in city of Kashgar (Obama administration urges restraint, paragraphs 13-14)

By Chris Buckley

URUMQI, China, July 6 (Reuters) - At least 156 people have been killed in rioting in China's northwestern Xinjiang region, with the government blaming exiled separatists for the traditionally Muslim area's worst case of unrest in years.

Hundreds of people have been arrested, the official Xinhua news agency said, after protesters from the Uighur minority took to the streets of the regional capital Urumqi on Sunday, burning and smashing vehicles and shops, and clashing with police.

Police dispersed about 200 people "trying to gather" at the Id Kah mosque in the center of the Silk Road city of Kashgar on Monday evening, Xinhua said.

The unrest highlights the volatile ethnic tensions that have accompanied China's growing economic and political stake in its western frontiers.

Along with Tibet, Xinjiang is one of the most politically sensitive regions in China and in both places the government has sought to maintain its grip by controlling religious and cultural life while promising economic growth and prosperity.